The text below is an edited version of an Insight originally published on CRU Online, dated 2 February 2026. For the full version, contact us here.
January delivered strong precious metals market volatility. It forced markets to reprice risk quickly as geopolitics, policy credibility and funding conditions collided. In our view, the month is best understood as three overlapping phases:
- A conviction-led surge
- Momentum, leverage and crowding
- The Yen, funding market stress and the reset
Phase one: A conviction-led surge
The early rally had the feel of deliberate risk management rather than late-cycle exuberance. As markets reopened after year-end, investors faced a less comfortable backdrop – geopolitical risks were back in focus, policy uncertainty was rising, and confidence in institutions started to look a bit shakier.
This mix matters because it changes what investors are trying to hedge. This was not primarily about near-term macro data or incremental rate expectations. It was about demand for assets perceived as sitting outside the policy system. Gold became the natural first destination – initially through measured reallocations, and then through broader participation once the move looked technically “confirmed”.
Silver lagged at first, behaving like a spillover safe-haven trade. However, as the gold move gained traction, silver’s own market structure began to matter more – thinner liquidity and supply constraints can turn steady buying into outsized price action. At this stage, the rally still made sense fundamentally, even if the speed began to turn heads.
Phase two: When momentum meets leverage
As the month progressed, trade shifted. What began as conviction increasingly became a momentum position. Futures participation grew, leverage rose, and positioning became more crowded. This does not necessarily invalidate the underlying case, but it does change the market’s fragility – the more a rally relies on stable funding and contained precious metals market volatility, the more sensitive it becomes to any shock that tightens financial conditions.
At the same time, cross-market signals turned less supportive. Rising foreign-exchange volatility and higher correlations across risk assets can reduce diversification benefits precisely when they are most needed, making risk limits bind faster.
Phase three: Funding market stress and the reset
The turning point was not a sudden change in the fundamental story for metals – it was the funding channel, with the Japanese yen being a key transmission mechanism. A stronger yen and higher Japanese yields challenged the assumption that yen funding remains cheap and predictable. For leveraged investors, this combination can rapidly erode returns, shrink available collateral, and raise the cost of holding positions.
Once funding market stress rises, market plumbing takes over. Higher margin requirements and tighter bank risk controls force a choice – add cash or cut exposure. In stressed conditions, selling concentrates in the most liquid instruments – often gold and silver as they are easiest to exit quickly. Add contract expiry dynamics and crowded trend positioning, and a pullback can become a sharp correction even without a genuine shift in long-term demand.
What January changed – and what it didn’t
The important point is that the sell-off looked largely mechanical. However, the month did reset the playing field – precious metals market volatility is higher, and price action is now more responsive to funding conditions and FX moves than it appeared in the earlier, smoother phase.
Gold has reinforced its role as the complex’s anchor hedge against institutional and political risk. Silver has again shown its hybrid nature – capable of powerful upside, but vulnerable to abrupt downdrafts when leverage builds. Platinum and palladium, by contrast, remain more tightly linked to industrial narratives, and January highlighted how quickly spillover strength can fade when liquidity tightens.
The message for positioning is clear – fundamentals still matter, but in this environment, market mechanics can matter just as much, and much sooner than investors expect.
For readers interested in how geopolitical risks will influence the future of precious metals, CRU’s Precious Metals service provides detailed understanding of current and emerging trends. If you want to hear more about our work, get in touch with us – we’ll be happy to answer your questions.
